4 Events Affecting Hospitals: 3 Hurt, 1 Helps

Health insurers’ vertical integration strategies will pressure hospitals, but the formation of a generic drug company should lower their costs.

Health insurers’ strategies of acquiring physician groups and other non-acute care providers will put further pressure on the volumes and margins of hospitals, says bond rating agency Moody’s in a quarterly report.

Other mergers that seek to add a large pharmacy chain to a health insurer and one that will combine an insurer with Kindred’s home health and hospice business will also pressure hospitals’ margins. But hospitals’ plan to band together to form a generic drug company would reduce pressure on hospital margins at the same time.

Moody’s, which rates bonds issued by hospitals and health systems, couches these...